Lifeline of Insurance Planning

Insurance besides protection is considered as an Investments and tax benefit tool

Kairav Shah

11 Jan 2010

March
is approaching and many of you have got busy with your tax planning.
In the process you are looking at various financial instruments
available in the market and insurance is surely on your agenda. So if
you are considering Insurance for the purpose then it is important
that you consider the few aspects of Insurance.

Insurance
besides protection is considered as an Investments and tax benefit
tool too, but is it right to use insurance as money making vehicle?

Not
really! Insurance policy should not be considered as far as
investments are concerned. If insurance is taken with an intention of
generating profits then it's a wrong notion. Insurance is a promise
of reimbursement in the case of loss, paid to the families of people
in case of any untoward incident, that they have made prepayments to
an insurance company. Going by the definition, nowhere it speaks
about earning any profits or about any possibilities of investments.
In fact it explains about indemnifying the loss occurred and one may
pay towards the unforeseen eventuality in advance and cover the same
at present.

Different
life stages require different types and amounts of Insurance covers.

The
table below illustrates the major insurance needs at different life
stages:

Step
up term cover to match income growth, continue other covers, start
annuities for retirement planning

Buys
house

Continue
previous covers, Buy Home Loan term cover

Pre-retirement
years

Continue
covers and add term cover to match income growth

Retirement

Continue
asset, health and personal accident covers

This
is covered by Term
insurance offered by Insurance Companies which is the
original form of life insurance and is considered to be pure
insurance protection because it doesn't have any repayment value.

Some
of the Term Insurance Plans offered by various insureres are listed
below:

Along
with the Term Insurance coverage you can also consider taking riders
for a small extra premium but benefits are big.

What
are riders? Riders are add ons bundled with your life insurance
policy given at the same time when the policy is issued, for a cost.

One
such common rider is accidental death, which is commonly referred to
as "double
indemnity",
which pays twice the amount of the policy's face value if death
results from accidental causes, as if both a full coverage policy and
an accidental death policy were in effect on the insured.

Another
common rider is premium waiver, which waives future premiums if the
insured becomes disabled.

This
way your life insurance policy becomes all the more valuable with
these riders and provides you peace of mind too.

And
it provides you with that much sought after tax benefit too.

Now
that you have plugged in yourself and your dear ones, it is time to
look for some investments. For that there are various financial
instruments available in the market like Public Provident Fund,
Equity Linked Saving Scheme of mutual funds, National Saving
Certificates and Fixed Deposits which offer tax benefit too.

Get Life Insurance Proposals

Upto 5 providers will offer you alternative proposals based on Aug 2018 premiums